The world fertilizer market is not showing a very promising situation due to the influence of a number of unfavorable factors such as supply disruptions leading to high fertilizer prices, causing fertilizer demand to decrease sharply in the period 2021 – 2022. In addition, the world fertilizer market has had a significant impact on the fertilizer market in Lao by reducing domestic demand, but promoting increased export output.

The article below will provide the most general picture of the world fertilizer market in general and the fertilizer market in Lao in particular. It will include the following sections: overview and price fluctuations of the world fertilizer market to overview and price fluctuations of the fertilizer market in Lao.

I. Overview of the world fertilizer market.

Disruption in fertilizer supply in 2022

Russia plays an important role in the fertilizer industry, being the second largest producer of both nitrogen fertilizers (ammonium and urea) and potassium fertilizers, and the fifth largest producer of phosphate fertilizers (phosphorus-containing fertilizers). Besides, on the fertilizer market globally, Russia also plays an extremely important role, accounting for 23% of ammonium exports, 14% of urea exports, and 21% of potassium exports. In addition, as the world’s second largest natural gas producer, Russia provides about a quarter of global natural gas, the main raw material for nitrogen fertilizer production.

In February 2022, the conflict between Russia and Ukraine caused many serious consequences affecting the fertilizer industry around the world, including: the closure of a series of fertilizer factories in these two countries; the rising gas and coal prices negatively affect fertilizer production efficiency in Europe and China; following are European sanctions on fertilizer goods from Russia and Belarus, thus leading to restrictions on fertilizer exports to Russia and China to ensure enough fertilizer to serve the domestic market.

From the above factors, experts of International Fertilizer Association (IFA). It is predicted that in 2022, the amount of ammonium used to produce fertilizer will decrease by about 3% compared to the previous year. Besides, global potash production is forecast to decline by around 14% from the previous year due to a sharp drop in fertilizer output from Belarus and Russia, primarily as a result of sanctions.

Fertilizer demand will decline in 2022

The amount of fertilizer used in agriculture, measured based on the concentration of major nutrients in fertilizers, including nitrogen (N), phosphorus (P), and potassium (K), fell 2% in 2021 and an additional 4% decrease in 2022. According to the International Fertilizer Association (IFA), it is estimated that fertilizer demands in 2022 will reach 190 million tons, down 4% over the same period last year – this is the largest decrease in the past 5 years.

The largest decline was recorded in potash production (-9.8% from the previous year), followed by phosphate (-3.5% from the previous year) and nitrogen (-2.2% from the previous year). The regions leading this downward trend were East Asia, Southeast Asia, Latin America, Eastern Europe, and Central Asia, with a total decrease of 8.3 million tonnes (N, P2O5, K2O).

In particular, in Southeast Asia, where rice and palm oil are produced, fertilizer consumption has recorded a sharp decrease. The main causes leading to this decline include: (1) The increase in fertilizer prices far exceeds the prices of agricultural products, reducing fertilizer purchasing power; (2) Issues related to fertilizer transportation, affected by the conflict between Russia and Ukraine; and (3) China’s export restrictions, along with sanctions imposed on Russia and Belarus.

II. Global fertilizer market price trends

2.1 Urea fertilizer price

The conflict between Russia and Ukraine makes fertilizer shipments from Russia (the country that occupies ~16% of global urea export output) encounter many difficulties, thereby weakening supply, especially in Europe. This has led to a significant increase in the price of Urea in 2022, from 23% to 42% compared to the same period in 2021.

In particular, in the first quarter of 2022, the price of Urea increased sharply and reached the highest price since 1995. In March 2022, the average price of Urea began to increase suddenly by about 26% compared to the previous month, up to about 760 USD/ton. However, prices decreased again in the second quarter and increased again to 690 USD/ton in 9/2022 (compared to 556 USD/ton in July). The price decline is attributed to Gazprom (Russia’s largest oil and gas company) cutting gas supplies from 40% to 20% in June 2022, and further to 0% by August 31, 2022. This has driven up gas prices in Europe, causing European urea manufacturing plants to reduce output by an additional 500,000 tonnes per month.

2.2 Potassium fertilizer price

The potash market also experienced a similar situation, with strong price increases leading to reduced demand and forcing production cuts by manufacturers compared to 2021. Potash prices surged in the first quarter and the first half of the second quarter of 2022, before gradually declining towards the end of the year. The global average potash price in 2022 was around 563 USD/ton (an increase of 145% compared to the same period in the previous year). This increase was mainly due to: (1) sanctions imposed on Belarus; and (2) transportation difficulties caused by the Russia-Ukraine conflict. Meanwhile, Belarus and Russia, which account for 22% and 29% of global potash export volume, respectively.

2.3 DAP/MAP fertilizer price

After experiencing a sudden increase in 2021, DAP price reached its highest peak of 954 USD/ton (up 76% over the same period last year) in April 2022. In particular, three main reasons led to this increase include: (1) Political conflict between Russia and Ukraine has caused increased production costs (including sulfur, ammonia and phosphate rock) and transportation costs (Russia is leading exporter of ammonia, accounting for 30% of the export market share and ranked third in sulfur, accounting for 9% of the export market share); (2) sanctions imposed on large fertilizer producers such as Belarus and Russia have narrowed the supply of phosphate fertilizer, while the demand for phosphate fertilizer and crop nutrients has increased sharply all around the world; and (3) China, which accounts for 30% of total global trade in 2021, has imposed export restrictions to ensure sufficient supply for the domestic market.

III. Overview of the fertilizer market in Lao

Domestic demand declined due to rising fertilizer prices

According to the Lao Fertilizer Association, domestic fertilizer demand in 2022 has decreased by approximately 20-30% compared to 2021. Some main reasons also come from: the prices of agricultural products did not rise proportionally to the surge in fertilizer costs; shortage of imported fertilizers due to the political conflict between Russia and Ukraine along with export restrictions.

Therefore, many farmers have narrowed their growing areas. Specifically, according to the report of General Statistics Office (GSO), the rice planting area in 2022 is expected to reach 7,1 million hectares, descreses 127.7 thousand hectares compared to the previous year. In addition, in 2022, Lao imported about 3.35 million tons of fertilizer, worth nearly 1.6 billion USD – a decrease of about 1.2 million tons (-27%), but an increase of 127.7 million USD in value compared to 2021 (rise by 9% over the same period last year). In which, the import quantity of most main fertilizers decreased: DAP (down 33.7 thousand tons, -9% over the same period last year), Potassium (down 617.6 thousand tons, – 52% over the same period last year), Urea (down 195 thousand tons, -66%) and NPK (down 53.4 thousand tons, -13% over the same period last year).

Bright spot for the domestic fertilizer industry: fertilizer export output skyrockets in 2022

Driven by favorable global market conditions, Lao’s fertilizer exports surged to 1.7 million tons in 2022, marking a 29% increase compared to the same period in the previous year, according to the Ministry of Agriculture and Rural Development and for the first time fertilizer export revenue of Lao has surpassed the 1 billion USD mark (up 96% over the same period last year). With an average export price of USD 625.2 per ton, marking a 34% increase compared to the previous year, Lao’s fertilizer exports in 2022 were primarily concentrated in Southeast Asian countries. Cambodia emerged as the largest market, accounting for 27.63% of the total fertilizer export volume. Other significant export markets included Singapore, Malaysia, South Korea, Philippines, Myanmar, Laos, and various other countries.

In 2022, Lao’s Ure fertilizer export activities have increased sharply compared to 2021. In which, export output in 2022 has increased by about 348 thousand tons (+85%), reaching 757 thousand tons, accounting for 30% of total domestic production. This marked an increase compared to the proportion of around 17-19% during the period from 2020 to 2021. The strong growth in export activities helped domestic Urea production maintain slight growth compared to 2021, despite high production input costs (ammonia and gas, etc.)

In contrast, Lao’s export output of NPK and DAP has decreased by about 17-18% compared to 2021. The main reasons are: (1) the price of NPK fertilizer has increased, causing farmers in the markets switch to use NPK fertilizer with lower quality and price; (2) price of DAP continuously decreased sharply from August to the end of 2022, leading to difficulties in negotiating export orders at factories in Lao.

IV. Price trends of the fertilizer market in Lao

Due to the impact of global fertilizer market factors, domestic fertilizer prices have maintained an upward trend in the first half of 2022. In particular, they peaked in March-April 2022 before the onset of signs of gradually decreasing from the third quarter of 2022. In which, according to Agromonitor Urea, Potassium and DAP fertilizer prices increased 33%, 69% and 49% respectively compared to 2021.

Conclude

The conflict between Russia and Ukraine has had a significant impact on the fertilizer situation in Lao and around the world as Russia is one of the leading countries in terms of export output and supplies large amounts of gas to serve fertilizer production. However, the fertilizer market situation in Lao shows some bright spots when export output to countries, especially Southeast Asian countries, increased, although domestic fertilizer output reduced.

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